Italgas presents its 2018-2024 strategic plan

Wed Jun 13 06:04:00 UTC 2018 CEST

Milan, 13 June 2018 - Chief Executive Officer Paolo Gallo is today presenting to analysts and investors the Italgas Group's Strategic Plan for the 2018-2024 period, which was approved yesterday by the Board of Directors chaired by Lorenzo Bini Smaghi.

Italgas' growth objectives are based mainly on a significant programme of investment, significantly increased compared to the previous Plan, in a market that is still fragmented and which offers various opportunities for business development, leadership consolidation and the creation of value for shareholders.

Highlight

Investment plan, including M&A, of EUR 4 billion

Additional investments of EUR 1.6 billion in the acquisition of third-party networks following gas tenders

Programme to digitise networks and processes and launch Digital Factory in 4thQ 2018

Dividends up to 4% per annum with upside potential to 60% of consolidated net income

Investment plan (without tenders) of EUR 4 billion

In the period 2018-2024 Italgas has an investment plan of €4 billion, an increase of more than 30% compared with the previous plan. This includes €2 billion for the development and improvement of the network, around €800 million for technological innovation and digitization (including the completion by 2020 of the installation plan for smart meters), approximately €450 million for the construction of gas networks in Sardinia and, finally, approximately €420 million in total for growth through M&A operations and the related technical investments to be made on the newly acquired networks. With the implementation of this Investment Plan, the number of meters managed will grow from approximately 6.6 million (at 31/12/17) to approximately 7.1 million at the end of the Plan (excluding affiliates).

In addition, a further growth option is represented by sector tenders with total investments estimated at approximately €1.6 billion, including both acquisitions of third-party networks and technical investments to be made in the areas awarded, with an increase in the number of meters that will reach 8.5 million (excluding affiliates) at the end of the Plan period.

Consolidated Rab: the implementation of the planned organic investments will increase the consolidated Rab by an average of 3.2% per annum over the period of the Plan and by an average of more than 5.3% per annum, considering the expected evolution of the tenders.

Operational efficiency: continuous focus on the optimisation of operating costs with the aim of improving the efficiency targets set by the Regulator.

Capital structure and financial efficiency: constant focus on optimisation of debt structure, with the objective of fully covering, thanks to the significant operating cash flow, both the investment plan and the return on risk capital guaranteeing also an appropriate financial flexibility to support development.

Dividend policy: for the years 2018-2019-2020 a dididend will be distributed equal to the higher of (i) the amount resulting from the 2017 DPS (€0.208) increased by 4% per annum and (ii) the DPS equivalent to 60% of the consolidated net income.

Paolo Gallo, CEO of Italgas, said:

“The priorities of the Industrial Plan are organic growth supported by a robust plan of investments, M&A operations, competitiveness improvement and quality of service provided to customers thanks to programmes of technological innovation. In this context, the plan to install smart meters, which represents the first step in the process of digitising networks and which we will complete in early 2020, is particularly important, as is the launch by the end of 2018 of the Digital Factory which will be the engine for the full digitization of business processes. The adoption of digital technologies will allow further improvements in operational efficiency and the improvement of services offered to commercial companies and end customers. The solid financial structure will allow us to take further opportunities to create value while maintaining financial conditions in line with our creditworthiness. The effect of these actions, which benefit the country and the entire Italian gas distribution system, also result in a strengthening of our dividend policy which, based on the 2017 dividend of €0.208, will see an increase of 4% for the next three years, but with a potential upside to a 60% of the consolidated net income”.